Threat from new entrants/ Barriers to entry: The initial investment in beer production is large as plants and production technology are complex and take time to establish. Furthermore, establishing a brand identity and establishing relationships with retail outlets is time consuming and can be difficult. Because of the presence of a few market dominating firms, threat from new start-ups is small, except in niche markets. Therefore we can conclude that barriers to entry are moderate. Substitutes: The alcoholic beverage found to be the closest substitute to beer available on the market is cider.
The cider industry is growing rapidly and it is becoming an increasingly popular choice among beer drinkers. Rivalry: The market leader in beer sales is Heineken, which holds 32% total volume share in 2010 (Euromonitor International, April 2011, page 3). This closely followed by Mahou with 30% total volume share. In this respect, the beer industry is not particularly competitive. However, amongst smaller brands competing for niche market share, there is fierce competition. 2. Who, What, How analysis: Functions or needs: Thirst, social needs, relaxation (WHAT) Customer Groups: (WHO) Teens & adults Students, friends, families & retirees.
Product varieties / Technologies: Premium Lager Beer, Standard Lager Beer, Non-alcoholic Beer, Light Beer (HOW) 3. Identification of key trends: Beer sales were affected by the 2008/09 financial crisis. Consumers decreased spending on going out and other leisure activities. Therefore on trade (drinking when out) fell by 7% in 2010 and off trade (staying in and drinking) rose by 1%. This follows the growing trend to stay in and socialise rather than going out to bars etc. The increase in price sensitivity of consumers has also contributed to an increase in supermarket and hypermarket market share for beer sales.
Many Supermarkets and Hypermarkets have created their own beer labels that they offer at a discounted price to take advantage of this increased price sensitivity. However, the majority of sales are still on trade, due to the Mediterranean climate and the Spanish culture of going out for a drink, especially during the warmer months. Furthermore, 30% of beer sales in Spain are made by tourists. Beer sales levels are extremely sensitive to fluctuations in tourism. The economic crisis caused a decrease in the tourism industry, and thus in beer sales.
In the south of Spain, lighter beers are more popular while in the North heavier beers with more body are more popular. Beer consumption in general is also strongly linked to the season, with more beer being consumed in warmer months. In 2010, the only beer product to achieve a total increase in sales growth was non-alcoholic beer. This could be the effect of an increase in health awareness and/or a reaction to stricter driving restrictions. Finally, the economic downturn has caused an increased demand for 330ml and 500ml canned beer relative to the traditional 330ml bottled variety. 4.
Competition Analysis: Heineken is the market leader in beer sales, with 32% total volume sales in 2010. Second is Mahou, with 30%. However, in 2010, Heinekens strategy to focus on premium lagers caused it to lose share, while Mahous standard lager and promotions focus caused them to gain market share. In third is Damm (Estrella, Voll, Xibeca Damm) with 12%. A large number of smaller labels share the remaining sales volume, with many of these brands focusing on niche product markets. To combat the sharp decrease in on-trade sales, major label have increased advertising to promote going out.
For example Mahou introduced the Get out the home! campaign, offering small bottles of San Miguel or Mahou and a tapas dish for a low price. 5. Interpretation of results We conducted an online survey consisting of both multiple choice and short answer response questions designed to provide a level of quantitative and qualitative analysis. We received 20 responses to the survey, and 90% of these respondents selected student in answer to the question what best describes you? . 55% of respondents were male, 45% female.
The combination of small sample size and a sample heavily skewed towards the student segment means that our research has not yielded result that are representative of the target population. However, we do believe that some of our findings are valuable to our analysis of the market. The survey revealed quality to be the most important influencing factor to our sample in choosing beer (48%). Following were price (32%) and brand (20%) and there were no votes for alcohol content. This indicates that the student segment looks for a quality beer that is reasonably priced and perhaps a recognisable or appealing brand. They do not necessarily drink beer just to get drunk.
Our sample did not show a preference for the major Spanish beer labels, with 75% choosing other as their preferred beer over Estrella, San Miguel and Heineken (the market leaders). This may be linked to the high percentage of international students completing the survey who prefer their native countries brands. As for where and when our sample consume beer, the responses were split between home and bars for location and showed preference for weekends and with friends for when and with whom. 40% of respondents drink beer 1-2 times a week.
We can interpret these responses as showing a trend towards casual, social drinking. 100% of respondents indicated that they would not purchase a non-alcoholic beer and do not consider health factors when purchasing beer. This does not support the growth in market share of non-alcoholic beers. Interestingly, 42% of respondents did indicate that light beer was their preferred variety. This could be linked to female drinkers preference towards lighter, sweeter beverages. Our qualitative analysis revealed a recurrent theme in word associations the respondents made with beer consumption.
Phrases such as chilling with friends, relaxing on the weekend and out with friends at a bar were most common. This supports our quantitative analysis that beer is consumed primarily in non-formal, social situations. 6. FCB Matrix [pic] 7. Decision-making Process Buying beer substantially is a low-involvement process since beer is not a very expensive product. We usually buy a certain brand of beer, try it for the first time, make evaluation on the product, then decide whether or not to buy it in the future. The low-involvement decision-making process in fact is a learning as mentioned.
We decide whether or not to repeat the purchase by learning from the buying experience. The graph below depicts the Think-Do-Feel theory. This diagram below is an elaborated version of the simplified model above:[pic] 8a. Segmentation Variables Possible options from our questionnaire survey: (i) occupation (full-time worker, part-time worker, student) and age (ii) consumption rate (high, medium, low) and consumption situation (home, bar, restaurant) (iii) purchase driver (brand, price, quality) and consumption companion (family, friend, alone) All these options are chosen from the questions we set for our survey.
However, we finally decide to use option (ii), i. e. consumption rate and consumption situation as the segmentation variables. We eliminate option (i) and (iii) because of these reasons. For option (i), we feel that the segment with certain kind of people with certain age will be too large for us to focus on in terms of marketing strategy. Different people in the same age with similar occupation may possess different attitudes towards beer. For option (iii), purchase drivers, i. e. the purchase tactics, change over time in different situations since it is a low-involved buying activity.
Therefore, it is difficult to predict the precise opportunity to do marketing for a new kind of brand, hence very difficult to target a very special target. The graph below shows the variables we use for segmentation, as well as some definitions of the variables. [pic] 8b. Various Segments Identified Below are some photos depicted the segments identified, as well as description of each segment. [pic] 7c. Segment Selected[pic] Target Light Beer Drinker based on the following reasons:
(i) Highest potential growth rate: can easily shift to the right to have medium usage rate, which means higher consumption of beer. That brings more revenue. (ii) Sophisticated drinkers have much experience on beer, which means that new brands like us could be eliminated easily in their consideration sets. (iii) Sophisticated drinkers could be brand-loyal to certain brands, which make it hard to make them shift to our brand. However, the column light beer drinker still leaves us three options. As a new company, we could like to do concentrated marketing so that we put all our effort into one single segment.
Therefore, we need to decide which segment we would like to get involved from the variable usage situation. We decide that from our survey based on the response and from other considerations including secondary research. [pic] However, the results of bar and home occupy the same percentage. Therefore, we made our decision based on both our qualitative research and secondary research. From What activities, emotions or adjectives do you associate with drinking beer? most respondents associate beer with socialising with friends and relaxing at home or at a bar.
However the market trend is showing a growth in home beer consumption. 7d. Positioning We have defined the position strategy for light beer using positioning maps. Since our survey depicts that most beer drinkers do so for socializing in bars, we have zeroed in on price and quality as the preferred attributes (and not necessarily variety, as youngsters feel comfortable with any light beer that has a good taste and reasonable variety). We see that Light Beer ranks moderately high on quality and low on price (only more expensive than non-alcoholic beer).
Hence our product is positioned as a moderately low priced Light Beer that ranks medium to high on quality. 8. Product Concept We came up with two different product concepts: a light and cheap beer to be consumed in bars and a light cheap beer to be consumed at home. Both beers are competitive from a price point of view but the beer that has to be consumed in bars should be in a glass bottle of 330ml whilst the beer addressed to the off-trade should be a 500ml glass bottle or can to push further the price competitiveness.
We decided we will further develop the off-trade beer because it is more coherent with our qualitative research results and with the market trends. Furthermore the decision to target a niche market, such as home beer consumption, is a better decision for a firm just entering the market, and therefore not ready yet to compete with established beer firms on the open market. Appendices [pic] [pic]